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Worker cooperative

A worker coperative is a cooperative owned and democratically controlled by its employees. There are no outside or consumer owners in a worker coperative -- only the workers own shares of the business.

Definition of worker cooperative

There are many definitions as to what qualifies as a workers' cooperative. For example, CICOPA, the International Organisation of Industrial, Artisanal and Service Producers’ Cooperatives, gives an 8-page definition in their World Declaration on Workers' Cooperatives, which was approved by the International Co-operative Alliance General Assembly in September 2005. Below is the section on the basic characteristics of workers' cooperatives:

They have the objective of creating and maintaining sustainable jobs and generating wealth, in order to improve the quality of life of the worker-members, dignify human work, allow workers’ democratic self-management and promote community and local development.
The free and voluntary membership of their members, in order to contribute with their personal work and economic resources, is conditioned by the existence of workplaces.
As a general rule, work shall be carried out by the members. This implies that the majority of the workers in a given worker cooperative enterprise are members and vice versa.
The worker-members’ relation with their cooperative shall be considered as different to that of conventional wage-based labour and to that of autonomous individual work.
Their internal regulation is formally defined by regimes that are democratically agreed upon and accepted by the worker-members.
They shall be autonomous and independent, before the State and third parties, in their labour relations and management, and in the usage and management of the means of production.

Many workers' cooperatives also follow the Rochdale Principles and values, which are a set of core principles for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844 and have formed the basis for the principles on which co-operatives around the world operate to this day.

Even though there is no universally accepted definition of a workers' cooperative, they can be considered to be businesses that make a product, or offer a service, to sell for profit where the workers are members or worker-owners. Worker-owners work in the business, govern it and manage it. Unlike with conventional firms, ownership and decision-making power of a worker cooperative should be vested solely with the worker-owners and ultimate authority rests with the worker-owners as a whole. Worker-owners control the resources of the cooperative and the work process, such as wages or hours of work.

As mentioned above, the majority – if not all - of the workers in a given worker cooperative enterprise should be worker-owners, although some casual or wage workers may be employed with whom profits and decision making are not necessarily shared equally. Workers also often undergo a trial or screening period (such as three or six months) before being allowed to have full voting powers.

Participation is based on one vote per worker-owner, regardless of the amount of shares or equity owned by each worker-owner. Voting rights are not tied to investment or patronage in the workers' co-operative, and only worker-owners can vote on decisions that affect them.

As noted by theorists and practitioners alike, the importance of capital should be subordinated to labour in workers' cooperatives. Indeed, Adams et al. see workers' cooperatives as "labor-ist" rather than "capital-ist":

"Labor is the hiring factor, therefore the voting and property rights are assigned to the people who do the work and not to capital, even though the worker-members supply capital through membership fees and retained earnings...Any profit or loss after normal operating expenses is assigned to members on the basis of their labor contribution."

Workers' co-operatives have often been seen as an alternative or "third way" to the domination of labour by either capital or the state (see below for a comparison).

In short, workers' co-operatives are organised to serve the needs of worker-owners by generating benefits (which may or may not be profits) for the worker owners rather than returns to (often external) investors with capital. This worker-driven orientation makes them fundamentally different from other corporations. Additional cooperative structural characteristics and guiding principles further distinguish them from other business models. For example, worker-owners may not believe that profit maximisation is the best, or only, goal for their co-operative or they may follow the Rochdale Principles.

Profits (or losses) earned by the worker's cooperative are shared by worker owners. Salaries generally have a low ratio difference which ideally should be "guided by principles of proportionality, external solidarity and internal solidarity" (such as a two to one ratio between lowest and highest earner), and often are equal for all workers. Salaries can be calculated according to skill, seniority or time worked and can be raised or lowered in good times or bad to ensure job security.

Internal Structure

Worker cooperatives have a wide variety of internal structures. Worker control can be exercised directly or indirectly by worker-owners. If exercised indirectly, members of representative decision-making bodies (e.g. a Board of Directors) must be elected by the worker-owners (who in turn hire the management) and be subject to removal by the worker-owners. This is a hierarchical structure similar to that of a conventional business, with a board of directors and various grades of manager, with the difference being that the board of directors is elected.

If exercised directly, all members meet regularly to make - and vote on - decisions on how the co-operative is run. Direct workers' cooperatives sometimes use consensus decision-making to make decisions. Direct worker control ensures a formally flat management structure instead of a hierarchical one. This structure is influenced by activist collectives and civic organizations, with all members allowed and expected to play a managerial role. Such structures may be associated with more radical political aims such as anarchism, libertarian socialism and participatory economics.

Some workers' cooperatives also practice job rotation or balanced job complexes to overcome inequalities of power as well as to give workers a wider range of experiences and exposure to the different jobs in a work place so that they are better able to make decisions about the whole workplace. The Mondragon Bookstore & Coffeehouse is a good example of a workplace that does this.

History of worker cooperatives

Historically, worker cooperatives rose to prominence during the industrial revolution as part of the labour movement. As employment moved to industrial areas and job sectors declined, workers began organizing and controlling businesses for themselves. Workers cooperative were originally sparked by "critical reaction to industrial capitalism and the excesses of the industrial revolution." (Adams et al 1993: 11) The formation of some workers co-operatives, such as those by the Knights of Labour in 19th century America, were designed to "cope with the evils of unbridled capitalism and the insecurities of wage labor" .

Most early worker co-ops did not adhere to clear cooperative structures or ideologies. Starting in the 1830s, worker cooperatives were formed by hat makers, bakers, and garment workers.

In the United States there is no coherent legislation regarding worker cooperatives nationally, much less Federal laws, so most worker cooperatives make use of traditional consumer cooperative law and try to fine-tune it for their purposes. In some cases the members (workers) of the cooperative in fact "own" the enterprise by buying a share that represents a fraction of the market value of the cooperative.

When the current cooperative movement resurfaced in the 1960s it developed mostly on a new system of "collective ownership" where par value shares were issued as symbolic of egalitarian voting rights. Typically, a member may only own one share to maintain the egalitarian ethos. Once brought in as a member, after a period of time on probation usually so the new candidate can be evaluated, he or she was given power to manage the coop, without "ownership" in the traditional sense. In the UK this system is known as common ownership.

Some of these early cooperatives still exist and most new worker cooperatives follow their lead and develop a relationship to capital that is more radical than the previous system of equity share ownership.

In Britain this type of cooperative was traditionally known as a producer cooperative, and, while it was overshadowed by the consumer and agricultural types, made up a small section of its own within the national apex body, the Cooperative Union. The 'new wave' of worker cooperatives that took off in Britain in the mid-1970s joined the Industrial Common Ownership Movement (ICOM) as a separate federation. Buoyed up by the alternative and ecological movements and by the political drive to create jobs, the sector peaked at around 2,000 enterprises. However the growth rate slowed, the sector contracted, and in 2001 ICOM merged with the Co-operative Union (which was the federal body for consumer cooperatives) to create Co-operatives UK, thus reunifying the cooperative sector.

In 2008 Co-operatives UK launched The Worker Co-operative Code of Governance. An attempt to implement the ICA approved World Declaration.

Political Philosophy of workers' cooperatives

The advocacy of workplace democracy, especially with the fullest expression of worker self-management, such as within workers' cooperatives, is rooted within several intellectual or political traditions:

The alleviation of alienation in the workplace, especially in regard to Marxist thought
The encouragement of Participatory or Direct Democracy
Radical but popular-democratic strategies for the overthrow of capitalism, for example, several strains of anarchist thought.
Autonomy and self control, especially within anarchist thought.

Workers' cooperatives are also central to ideas of Autonomism, Mutualism, Syndicalism, Participatory economics, Guild socialism, Libertarian socialism as well as others.

Trade Unions

Unions are often unnecessary in worker cooperatives as the workers have direct control over the management and ownership of the business - they are negotiating with themselves. Some worker cooperatives still choose to become members of local unions to demonstrate their support for the labor movement and to working conditions that have resulted from years of struggle. While an unusual situation, there is no contradiction in doing so. Worker cooperatives that join unions often benefit from the trade that comes their way from the community of union members and those who support unions for political reasons. The labor contract negotiated becomes the baseline of benefits due to the membership and guarantees to the community that the working conditions are not unfavorable. Union membership also guarantees that the worker cooperative will not operate on the basis of typical small business sacrifice, where owner(s) sometimes work overtime to keep their business afloat and expect similar sacrifices of their workers. Union membership for worker cooperatives gives the enterprise a legitimate standard of operations.

Firms converting to worker ownership may benefit from union membership because a union provides an experienced structure for integrating the needs of business with democratic influence from workers on management decisions.

Worker cooperatives in Europe

Worker co-operation is well established in most countries in Europe, with the largest movements being in Italy, Spain and France.

The European Cooperative Statute, which has been in force since 2006, permits worker cooperatives to be created by individuals or corporate bodies in different EU countries. It is a loose framework which devolves much detail to the national legislation of the country in which the European Cooperative Society (ECS) is registered. It permits a minority of shares to be held by 'investor members' which are not employees.

Spain

One of the world's best known example of worker cooperation is the Mondragón Cooperative Corporation in the Basque Country.

UK

In the United Kingdom, the Labour Party's enthusiasm for worker cooperatives was at its highest in the 1970s and 1980s, with Tony Benn being a prominent advocate. A number of such co-operatives were formed during the 1974 Labour Government. However, this usually took place following the bankruptcy of a private firm in a desperate attempt to save the jobs at risk, and the change in ownership structure was usually unable to resist the underlying commercial failure. This was true in particular of the best known, the Meriden motor-cycle cooperative in the West Midlands which took over the assets of the ailing Triumph company, although there were instances of successful employee buy-outs of nationalised industries in the period, notably National Express.

Under UK law there is no special legal structure for a "co-operative". As noted by Catalyst Collective, an organisation which helps set up and register c-operatives in the UK, "Co-ops are registered under either the Company Acts, or the Industrial & Provident Societies Acts (IPS)" . A number of model rules have been devised to enable cooperatives to register under both acts; for workers' cooperatives, these rules restrict membership to those who are employed by the workplace. According to Radical Routes, "[m]ost [workers'] co-operatives are incorporated bodies" which limits the liability if it fails and goes into liquidation."

Although it only uses the term occasionally, one of the largest examples of a British worker cooperative is the retail giant, the John Lewis Partnership.

In North America

USA

The United States Federation of Worker Cooperatives is the only organization in the U.S. representing worker cooperative interests nationally. There are local networks and federations throughout the U.S. in the San Francisco Bay area, Minnesota, Portland, Oregon, and Boston, Massachusetts, and the Pioneer Valley region of New England.

Canada

Worker co-ops in Canada are represented by the Canadian Worker Co-op Federation(CWCF). Members of the CWCF are found throughout English Canada.

Ontario has its own federation with well-developed standards. Quebec has a distinct worker co-operative history, and is presently organised into a number of regional federations.

South America

Venuezuela

The Chávez government in Venezuela has a policy of financing worker cooperatives, resulting in a growing number in that country.

Argentina

In response to the economic crisis in Argentina, many Argentinian workers occupied the premises of bankrupt businesses and began to run them as worker-owned cooperatives. As of 2005, there were roughly 200 worker-owned businesses in Argentina, most of which were started in response to this crisis. The documentary film The Take is the best-known document in English about this phenomenon.

Asia

India

Indians own the largest worker cooperative in the world: Indian Coffee Houses. The Coffee Houses in India were started by the Coffee Board in early 1940s, during British rule. In the mid 1950s the Board closed down the Coffee Houses, due to a policy change. The thrown-out workers then took over the branches, under the leadership of A. K. Gopalan and renamed the network as Indian Coffee House. This history is recorded in Coffee Housinte Katha, a book in Malayalam, the mother tongue of A. K. Gopalan. The author of the book is Nadakkal Parameswaran Pillai one of the leaders of the ICH movement.

Comparison with Other Work Organizations

There are significant differences between ends and means between firms where capital controls labour, or firms where the state controls both labour and capital. Worker-ownership has been described as "a third way." These distinctions are easily seen when measured by essential elements of commerce: purpose, organization, ownership, control, sources of capital, distribution of profits, dividends, operational practices, and tax treatment. The following chart compares the commercial elements of capitalism, socialism, and cooperative worker-ownership. It is based on US rules and regulations.

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Commercial Criteria	Corporations	State-Owned Enterprises	Worker Cooperatives
Purpose	a) To earn profit for owner, to increase value of shares.	a) To provide goods and services for citizens.	a) To maximize net and real worth of all owners.
Organization	a) Organized and controlled by investors	a) Organized and controlled by state	a) Organized and controlled by worker-members
	b) Incorporated under relevant incorporation laws - varies by country	b) Chartered by relevant level of government	b) Incorporated under relevant incorporation laws - varies by country
	c) Except for closely held companies anyone may buy stock	c) No stock	c) Only worker-members may own stock, one share per member
	d) Stock may be traded in the public market	d) n/a	d) No public sale of stock
Ownership	a) Stockholders	a) State	a) Worker members
Control	a) By Investors	a) By state	a) By worker members
	b) Policies set by stockholders or board of directors.	b) Policy set by government planners.	b) Policy set by directors elected by worker-members, or by assembly of worker-members
	c) Voting on basis of shares held	c) n/a	c) One person, one vote
	d) Proxy voting permitted	d) n/a	d) Proxy votes seldom allowed
Sources of Capital	a) Investors, banks, pension funds, the public	a) The state	a) By members or lenders who have no equity or vote
	b) From profitable subsidiaries or by retaining all or part of the profits		b) From net earnings, a portion of which are set aside for reinvestment
Distribution of Net Margin	a) To stockholders on the basis of number of shares owned	a) To the State	a) To members after funds are set aside for reserves and allocated to a collective account
Capital Dividends	a) No limit, amount set by owner or Board of Directors	a) n/a	a) Limited to an interest-like percentage set by policy
Operating Practices	a) Owners or managers order production schedules and set wages and hours, sometimes with union participation	a) Managers order production schedules and set wages and hours, sometimes with union participation	a) Workers set production schedules either through elected boards and appointed managers or directly through assemblies
	b) Working conditions determined by labour law and collective bargaining.	b) Working conditions determined by labour law and collective bargaining.	b) Working conditions determined by labour law and assembly of worker-members, or internal dialogue between members and managers.
Tax Treatment	a) Subject to normal corporate taxes	a) n/a	a) Special tax treatment in some jurisdictions